Research

The FMG combines the assets of a strong and solid academic background developed over the course of 25 years of research work, with a dynamic environment comprised of young, promising researchers and senior faculty, and a strong link with senior practitioners and the policy-making community.

Therefore, FMG is in the unique position to develop topical research that, in addition to its value academically, has an impact on the reality and processes of financial institutions, and on policy decision making globally.

The programme examines how different types of agents interact in financial markets; how asset prices are formed and relate to economic fundamentals; how price movements impact firms’ investment and the macro-economy; and how regulatory policies affect market outcomes and economic welfare. A large part of the research in the asset management programme is currently conducted within the Paul Woolley Centre---that research departs from the Arrow-Debreu view of frictionless markets and emphasizes the role of financial institutions and their managers’ incentives in influencing prices and allocations. Additional research conducted within the programme abstracts away from frictions and explores themes such as the information inherent in asset prices and the link between financial markets and the business cycle.

The City of London accounts for 7 percent of UK GDP and employs 1,060,000 workers. It is UK’s largest exporter: In 2015 the country ran a £19.1 billion surplus in financial services with the European Union and £3.6 billion in insurance services. Brexit may put these achievements at risk. The focus of this programme is to quantify the likely effects of Brexit on the UK’s financial sector and suggest policies that may soften the negative consequences to banks and other financial companies of leaving the European Union.

The programme investigates the links between the financial sector and the development of the real economy. One area of research focuses on the effect of banking sector reform and the introduction of innovations in the bank financing of corporations and start-up firms, including through fintech solutions. A second area is the development of equity markets, from angel financing to private equity and stock market financing. A third area is the allocative efficiency role that financing plays to identify economic value. Investing long-term insurance and pension assets in areas to increase economic growth is a further topic for research.

The programme focuses on the study of firms, from their origins and evolution to financing choices, internal organisation, and performance. One of its primary goals is to understand the specific challenges surrounding the birth of new firms, such as skills and traits of successful entrepreneurs, the environment conducive to their development, and the importance of different financial options available to fund start-ups (bank finance, angel finance, crowdsourcing, and venture capital). Another primary goal of the programme is to develop a better understanding of persistent performance differences across seemingly similar organisations, in particular how such differences correlate with financial policies, governance structures, and management practices. Within the GEM programme, there are currently two sub-programmes: one on Private Equity, Venture Capital and Entrepreneurial Finance, led by Ulf Axelson, and one on Governance, led by Daniel Ferreira.

Systemic risk encompasses the risk that the financial system fails to facilitate the safe and efficient allocation of financial resources needed to serve the real economy. It is the risk that the system is not working properly. In the systemic risk programme, currently structured around the ESRC-funded Systemic Risk Centre (SRC), we study such risks, which may also trigger or amplify the next financial crisis, and we seek to develop tools to help policymakers and financial institutions become better prepared and increase both resilience and effectiveness. The study of the interlinkages between the many parts of the financial system and the real economy, and of the feedbacks between these parts, brings out the nature of the endogenous risks emerging from such interactions and provides tools for managing the risks.